Analysis

Defiant Tesla Sues Calif. County, Reopens Plant In Power Play

By Linda Chiem
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Law360 (May 11, 2020, 9:52 PM EDT) -- Tesla restarted operations at its Fremont, California, electric car manufacturing plant Monday after suing Alameda County for blocking its reopening, delivering a one-two punch that heightens the tension between government officials and businesses frustrated by the economic toll and pace of recovery from the coronavirus pandemic.

Tesla Inc. CEO Elon Musk, one of the most outspoken critics of stay-at-home orders in response to the COVID-19 outbreak, said in a Monday afternoon tweet that "Tesla is restarting production today against Alameda County rules. I will be on the line with everyone else. If anyone is arrested, I ask that it only be me."

Tesla, represented by Quinn Emanuel Urquhart & Sullivan LLP, filed suit Saturday in California federal court accusing Alameda County of an unconstitutional "power grab" by trying to enforce a stringent shelter-in-place mandate that prevented Tesla from reopening, after a recent state order allowed manufacturers in the Golden State to restart operations.

Experts told Law360 that while Tesla's lawsuit may raise some interesting constitutional and preemption questions, it's designed to be more of a political play that reinforces Tesla and its CEO's renegade status and could ignite further challenges to stay-at-home mandates.

"Beyond the clamor and fanfare that comes with anything involving Elon Musk and Tesla, the lawsuit raises issues that have sweeping implications across California and perhaps the entire country," said Brad Hughes, a transportation litigation attorney at Clark Hill PLC. "The issue presented by the case is relatively simple: Can Alameda keep the Tesla factory closed based on local health orders if the governor's orders would allow the factory to be open? As with most legal disputes, the devil is in the details."

In Tesla's view, Gov. Gavin Newsom's order allowing manufacturers of crucial infrastructure and services to resume operations overrides Alameda County's more stringent local order preventing Tesla from reopening its Fremont facility because the county determined that Tesla didn't fit the criteria of an "essential business." Musk said in a Saturday tweet that the county's stance was the "final straw," and suggested that "Tesla will now move its HQ and future programs to Texas/Nevada immediately."

At a news conference Monday, Newsom said the state would not undermine the existing authority of local health officials and the determinations they make about shelter-in-place orders in their respective jurisdictions.

"We recognize localism," Newsom said. "Both from a county who wants to go further and other counties that don't want to even go as far as the state."

A spokesperson for the Alameda County Health Care Services Agency and the Public Health Department referred Law360 to its Saturday statement explaining that it has been engaged in a "collaborative, good faith effort to develop and implement a safety plan that allows for reopening while protecting the health and well-being of the thousands of employees who travel to and from work at Tesla's factory."

No stranger to controversy, Musk with his tweets over the years has set off legal firestorms that have entangled him in a defamation trial with a spelunker who rose to fame for helping rescue a Thai soccer team trapped in a cave, as well as a feud with the U.S. Securities and Exchange Commission. The lawsuit against Alameda County and Musk's threats to relocate his electric car manufacturing plant to another state represent much of the same political flexing, experts say.

"From my perspective, this is much more a political move than a legal move," Jim K. Baer, a principal and founding partner of Baer Negrin & Troff LLP, told Law360. "This is more than just opening up a plant for the next week or two, saying we're an essential business. Elon Musk is a renegade that does things like this all the time, and this is more [about] Elon Musk than whether or not he has a legal case."

"The issue is, is this a hospital, is this about making face masks, or is this a guy making electric cars and selling them to rich people?" he added. "It's a little rhetorical, but look at it from the perspective of people working and [do] his workers have a right to work more than anybody else's workers?"

Tesla's suit seeks a permanent injunction barring enforcement of Alameda County's order, but the company reopened Monday anyway. Tesla says the county flouted the federal and California constitutions, but some say Alameda County may clear the "rational basis test" to justify why its shelter-in-place order is stricter than the state's because it's related to a legitimate government interest.

"There are some creative, clever arguments in there. The concerns that [Musk] is raising are the concerns a lot of businesses and industries writ large have, but I think this is just an effort to exert some pressure on this one county to change the way they're doing things or give him and Tesla special treatment," said Dan Handman, a Los Angeles-based partner at Hirschfeld Kraemer LLP. "The rational basis test is the easiest one for the government to meet."

However, Tesla's legal challenge may wind up setting the tone for other business disputes as state and local governments across the country begin loosening restrictions, experts say.

"Mandatory face masks in one county may not be mandatory in another. Salons may be non-essential in one area but essential in another. As governors begin to roll back broad restrictions and allow local municipalities to retake control over public health rules, it will not be long until we have a smattering of different rules varying between urban, rural, conservative, and liberal areas of a single state," Clark Hill's Hughes said. "Legal challenges to the constitutionality of these patchwork of rules is inevitable."

Andrew Pollis, a professor at Case Western Reserve University School of Law and former litigator with Cleveland-based Hahn Loeser & Parks LLP, told Law360 the issues will be difficult to unravel.

"You're going to see other suits like this pop up across the country as different states begin opening in different ways and different businesses feel that they're being singled out or treated unfairly with political motivations behind it," he said. "And so this is just going to be another one of those issues as the pandemic continues to impact us that we're going to see rippling over and over."

--Editing by Kelly Duncan and Brian Baresch.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Tesla Incorporated v. County of Alameda


Case Number

3:20-cv-03186

Court

California Northern

Nature of Suit

Constitutional - State Statute

Judge

Thomas S. Hixson

Date Filed

May 09, 2020

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